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Unit 6: ERP Benefits

multiple quantity and price breaks along with terms specifying when the quotation or contract notes
becomes effective and expires, are supported. To address the methods companies employ when
tracking and controlling these agreements these systems provide a number of alternatives.
First, after contracts are established, purchase order and requisitions are tracked as they are
released against a corresponding contract. The ERP system searches for the best-fit supplier
contract and automatically assign it to the corresponding purchase order or requisition. If changes
are know the status of a supplier quotation or contract, the system provides immediate feedback
to the organization. Detailed history provides for the deployment of in-depth procurement
analysis tools. The supplier management professional can easily compare total quotation or
contract commitments to actual purchasing activities.
With the flexibility and comprehensiveness of the system’s supplier quotation and contract
management capabilities, organizations can efficiently manage their supply-side partners and,
as a result gain significant cost and delivery procurement benefits for their business.
Also, since most suppliers have their connected to the company’s system, the information
regarding an order is transmitted to the supplier’s systems almost instantaneously. This saves a
lot of time and gives the supplier more time for fulfilling the orders.

Businesses generally classify their suppliers into certified, approved and probationary categories
for quality management and auditing purposes. Additionally, supplier certification programs
must be capable of distinguishing between suppliers and original manufacturers. The objective
of supplier auditing and classification programs is to ensure conformance of purchased materials
and services to specification, while minimizing lead-times and costs.

The quality management system in the ERP systems provides all the tools needed to implement
total quality management programs within an organization’s procurement function. Using the
system, organizations can establish and manage highly effective supplier certification programs,
which ensure maximum conformance of purchased material to specification, while maintaining
lead-times and costs. The quality control program can be managed on the basis of original
manufacturer, leaving the buyers free to seek the best possible price and delivery terms from a
variety of qualified distributors or brokers.

6.7 increased flexibility

Because competition is growing companies must learn to respond more rapidly to customer’s
wishes as well as changes in the market. They will need to be able to design new products or
re-design old products quickly and efficiently. Only then will companies have the chance to
capitalize on opportunities while they are available. The window of opportunity is often quite
small. The manufacturing process must be flexible enough to accommodate new product designs
with minimal disruption or time loss.
Flexibility is a key issue in the formulation of strategic plans in companies. Sometimes flexibility
means quickly changing something that is being done or changing completely to adjust to new
product designs. At other times flexibility is the ability to produce in small quantities in order to
obtain a product mix that may better approximate actual demands and reduce work-in-progress
inventories. Regardless of the definition of flexibility, traditional fixed automation manufacturing
facilities while efficient are often inflexible. Similarly extremely flexible operations are often
inefficient. An argument can be made for the relative merits of both efficiency and flexibility.
Actually both are desirable.

Product flexibility is the ability of the operation to efficiently produce highly customized and
unique products. Manufacturers tried to introduce some amount of flexibility by using the
assemble-to-order approach. This provided some amount of flexibility without increasing the
production cost, but could not be applied to all situations. Along the broad spectrum of make-
to-order manufacturing, there is a growing convergence between strictly assemble-to-order and

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